Q4 2020 OneSmart International Education Group Ltd Earnings Call
Good day and welcome to the one smartphone audited financial results.
Fourth quarter, and that's where your ended August 31st 2020 talked for example.
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Thank you operator good.
Good evening, everyone. Thank you for joining once more International Education Group Ltd fourth fiscal quarter 2020 earnings Conference call.
The Companys earnings without as well as supplementary slide presentation were released earlier today and are available on the Companys IR website at <unk> Dot was mad dog for GE.
Joining me this cool Mr., Steve Jones, Chairman, and CEO, and Mr. growth, you'll always see Apple and Seattle.
I would remind you that debt.
Oh may contain forward looking statements made under the safe Harbor provision of the private Securities Litigation Reform Act for 1995.
Such statements are based on management's current expectations and current market and operating conditions.
As it relates true event that the book.
No no no debt a.
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The company does not undertake any education to update any forward looking statement. That's every day.
Total new information future events or otherwise, except as required minimal.
With that I will now I'll turn the call over to Steve. Please go ahead Steve.
Thank you.
Hello, everyone. This we started all.
New fiscal year 2021 September.
We are excited to announce all go premium it's true that straight P. does not go pregnant strata true when they are solid foundation.
Accelerate growth.
In the next five years.
Number one.
Tinder as much help in the waiting for new products, we have for it.
Such as E D VIP VIP accenture and the constant for the upgrades premium teacher and [laughter] number for.
Thanks, Keith <unk> to maximize the market share and the intent to clean that net new center ex <unk>.
Flow continuous and to upgrade and non let's see premium when building to gain consumer connect to the nation up once not being that weekly sanity, I'll try to prevent education sector.
Oh easy VIP Goldman addressing all premier customers, Courtney Oh, Onestop school diminishing pen, yeah, wed CPFL customers opting not true in fiscal 2012.
The reason the new Pos sales growth in college, your thoughts to accelerate the opposite learning centers.
Has the quality of teaching the subject to catch the global economy.
In addition, we also launched for premium VIP products for young children's education, which is expected to drive for incremental close and the margin improvement in fiscal 2021.
We still have consumption operating in.
China's education sector, the big net pay Tal education sector. He said.
Enormous and does the market.
We will continue to launch the weighted products and services in response to customer <unk>.
Mr. Leading climate tilting service provider, we have competed to expand our market share in d. fastest moving sector.
For that I went out in the call for wasn't group, who had for why did you more details.
That uptick for the company performed in Q4 up lets please go ahead [noise] figure.
Thank you Steve Hello, everyone. Thank you for joining us.
Before I walk you through the Q4 earnings for some reason, which we noted only got websites or get today I would like to comment on our recent financial performance.
We are proud to overcome that line precedented challenge for Cobi, 19th and achieved critical Q4 net revenue growth so 35.7% from the price point, which exceeded the high end of the Guy that range, we completed fiscal year 2020 with net revenue equally so.
Oh, we got 2.9% target, we condemn me fiscal year 2019 moving.
Moving into funny, our new students and the cash sales growth how would be extremely robust do we do we fiscal quarter for in addition for the babies for periods due in September to mid November 2020, the average purchase tickets sides for what's my VIP business unit and the growth by 74 plus.
Compared to the standard payment last year, driven by strong demand and a customer commitments and the more premium product mix.
Beep indicate for recovery for power operations and a strong revenue growth in the next few quarters when the new student gradually consumed across unit.
For two to three seasons, particularly March to June interest because I'm hearing.
We expect our revenue in fiscal year, 2021 to which a ball physical to the other 19 double.
No that's not the earnings presentation first to add more detail to details to Steve's comments earlier on our growth strategy.
Let's turn to page six of our presentation slides.
The China premium K 12 after school tutoring sector continues to grow up to RMB 216 billion and RMB 309 billion in 2023, and 2026, respectively. According to the latest the market study sites other than Frost just.
It means that our current strategy other pieces plan.
Well lead us to expand to 5% and 10 per cent in three years and six yes in terms of market share from todays 3%.
Based on how you didn't debt understanding of consumer needs and the market trend, we launch new product quality Oh premium strategy you.
You will further differentiate once more for the mass market and its growth many competitive advantages.
What's more we don't we accelerate our growth and it reached RMB tend to get inside like food on 23, and R&D study for them side by 2026 true. The two primary growth drivers product innovation and the C.D. scale up.
On page seven we provided for more details on the growth drivers for our called VIP business Division by 2023, we expect to hire and each other we actually credit to take up 60% of our we at PTC sales to open a total of 160 to 200, it's actually centers and all.
Average, it's Pete could double by debt.
The growth will be achieved in high quality and improved probability that we will focus on the top 20 Cds twitchy economy of scale. In addition to increased sell a sales price.
No no to the performance update for the physical Q4 net that they progress it's difficult you fall off line operations continue to we bumped 98% for learning centers open by September that show on page nine we achieve peace go to you for net revenue growth for 30.
5.7% from the price for Ritchie.
Did you see heightened the guide you to range.
Cash accounts for the fiscal Q for increased by 45.3% funk for.
Please note that cash sales typically take one for two quarters turning into Krotz Consumptions, we expect incremental sales growth to drive for recovery for revenue growth for the next few quarters.
Moving on to our student you students cash well, it's going to be extremely robust during fiscal Q for that Sean neat.
The number of wants them up VIP, new students increased by 79% in Q4 from Q3, and 89% sequential growth for young children education business units.
The strong growth you get cheap so increased marketing assets to catch up new student pool.
Average monthly students enrolling for musical Q4, total 171000, improving 6.8% sequentially and turning into.
8.0% year over year increase from the negative 8.2 per cent, yeah, we will speak for you physical Q3.
Page 11 summarizes the key focus for one small VIP young children education, and what's normal line, what you fiscal year 2021 <unk>.
General well get continue to launch premium products focused on key cities and improve sensory environment for off line range well net operation is complimentary to off line business within price you pull no hold them all take all services.
Next I will reported the updates for each of our three business days.
Let's first start with L. cool once about VIP business on page 12.
For pure one for one program average enrollment increased by 14.8% and it actually has increased by 52.6% sequentially.
During September to mid November 2020, the average purchase ticket price for once Bobby I keep interest Union has grown by some people per cent compared to the same period last year do you wouldn't buy one strong demand to support price increase for old product line note that we have not systematically increase.
All right Hey, its p. for more than a year.
And true higher sales contribution from EBIT to be our people.
And three more subjects per average new student.
We expect the strong momentum in price increase and the sales growth to gradually translate into revenue recognition for the next few quarters.
[noise], we have reduced our learnings sensing sensing he can share we plan to open 27, I N flagship VIP center for the media, we actually program in fiscal year 2021.
Which will set a new standard for the industry as.
As shown on page 13, the upgraded study rooms, [laughter], what's more smart pitching system and essentially environment, it's more convenient and enjoyable.
The first batch of flagship center will open December 2020.
In the physical Q1, two day Oh.
13% of cash sales for once my VIP business were generated by elite, we actually program.
Three per cent you fiscal year 2020, and we expect this ratio would go to 20% in fiscal 2021.
Please turn to page 14%.
To support the launch of elite VIP program, we continued to invest in future talent pool and for teaching Soviet States.
For the VIP teachers.
I once more stark teacher framework with extensive teaching students that used to be consistent range is only 3% GAAP graduates from key University in China I project.
Hey price on 211 and ranked top line a sense you know, we're not seeing white foam jobs subject examinations.
By leveraging our dedicated R&D experts and Oh, well once for all night teaching band Oh, we have people that offers one stop <unk> mission for any comprising all public school oriented curriculum and upgrade its pretty net services.
Yeah, we actually program is expected to generate higher margin compared to record a one on one for where we illustrate the key financial average and on page 15 for the true product not decided stabilize sizes.
80% high volume price and 850% higher in teachers costs, we expect the growth margin looks like.
By three percentage points and the center level operating margin to expand by nine percentage points. This indicates that an improved operating on average will be released for the previous quarter.
Let's turn to page 16 update of our young children's education businesses.
During the fiscal Q for most happy mass in a fast track maybe should have been.
I'd be a steady recovery enrollment and he could have achieved strong sequential growth of 43.5 per cent you catch ups.
That's a key part of the business plan for the new physical 2021, we have launched premium VIP product made me practical matter Cobra and M.B.A. Kids English for happy masks and the fast track in English as part of the GAAP cleanup strategy.
We believe a more premium price and mix, we'll structurally improve the business model and the unique flow mix up our young children education businesses.
Likewise, we also upgrade centers and teachers profile, we plan to open site selection Center you put on 21, we adopt older more model for young kids to decrease the cost consumption true weekdays between constant teaching effect cultivate good study habits and do we leave parents from today.
By himself.
Practical masco, Glenn if these items for the nice thing or do you not interest for kids. This program is price 1.5 times leverage product, taking up 7% share. So total cash sales what's happening Matt to day since launching in September and being kids English is designed for broad international growth.
For kit it is price, 70% higher than regular product, taking up 13% share catskills for.
Struck English to day since launch in September.
Moving on to one for my own 18.
As explained in previous earnings calls for me up immediately to a healthy growth profit for one small not by sticking to positive free cash flow and avoiding burning cash flow scale.
Each project the same always right, that's our offline for growth, but for what value at in terms of convenience and the commodity mentally somebody's it's for the old mall takeout didn't model.
We constantly improved all night functionality to enhance customer experience the other.
Great like Oh, my thoughts moving to meet the new problem in multiple cost for Matt I mean on the interactive teaching without an additional effect there.
Technology improvements also for Goodbye.
Scott schedule and demonstration as well as optimized for the all night switching platform in Q4 people go your 2020, well my business generates RMB 72 million in cash build a sequential increase of 22% accounting for 8% of the total cash sales into for it.
Net revenue for all night business total RMB 52 million sequentially, 13% accounting for 5% of total net revenues.
The pure online enrollments increased 15% to essentially to 60000 in Q4.
Before I walk you through the financial results for more details I would like to comment on our anticipated margin expansion. Although are originally expected the margin Spencer you see late by several quarters due to the damage. We now expect margin to turn to pre production level and expand in second half.
2021, driven by couple of like was momentum.
HM East Ridge, and operating leverage that's always team and a center level ramp up continues.
Top typical Q4, Oh growth margin year over year decrease was primarily caused a one off revenue true up due to the Cobi 19, coupled with increased teacher profile, I mean, [laughter], earning interest to support all ticket product innovation.
We have already seen a sequential recovery trend in margin.
At the top line rebounds, we also strategically increased marketing spending in fiscal Q4 to catch up student acquisition effort at the center, we opened which helped generate robust cash sales growth.
With that I would turn the call over to Ita. Please.
Thank you Brad.
Before we go through the key financial results lets review the performance of our ones like the IP centers ramp up actually on page 21.
For those assets being solid and has a consistent trend ex before even without a partially generated from my weighted existing students on line for.
The Iraqi centers in Shanghai that have been operating for over two years. The census level operating margin turned 19 for Ben and in high at 29% on a certain here.
For VIP learning centers in our top 10 cities outside Shanghai, we have achieved a sensor level operating margin of 18% for the old hat, but that has been operating for over two years and the 15% other third yes.
While taking a view from sea to Apple Shanghai has a higher percentage of mature centers with normalized operating margin the.
The V.I.P. centered in the other top 10 cities, a maturing uptick good operations and enhance the brand awareness. Following what we have achieved in Shanghai for more than 10 years.
We are optimistic that the solid growth in our existing TCP well optimized our group level profit growth and margin expansion as we take a more focused growth strategy.
In the fourth quarter of fiscal 2020, net revenues were RMB 1 billion, a sequential increase of 35.7% exceeding the high end or guided range typically.
The sequential increase was mainly due to a strong recovery opted to assumption off our off line learning Center.
Cost of revenues decreased by 3.9 for Dan you only get to RMB 641 million due.
Due to our lean cost structure, we manage down to stop for partially offset offset by the increase in teachers cost the rental costs and depreciation and amortization costs related to our premium product offering and a new sense extension and up right. After the off line business is.
Gradually back to normalcy.
In Q4 gross profit increased by 41% to RMB 370 million from the prior quarter.
The growth margin stood at 36.6% up 1.4 percentage points from the prior quarter.
Non-GAAP, selling and marketing expenses, which exclude share based compensation expenses were RMB 290 aren't millions.
An increase of 11.6% from RMB 215 million during the same period last year.
We increased our sales and marketing efforts in fiscal two for things moat. Most of our learning centers started to reopen in late June in order to catch up on new student acquisition as dentists were closed in fiscal two sweet.
Strong growth achieved at new student schools.
70, 79% and 89% sequentially for the P.I.P. and young children businesses, respectively.
General and administrative expenses decreased by 29.7% year over year to RMB 216.
16 million non.
Non-GAAP general and administrative expenses, which exclude share based compensation were RMB 186 million a decrease of 34% year over year.
We continue to control, although our G and H spending at headquarters as well as regional offices.
The expense ratio in fiscal Q3, and Q for successfully maintained at low level wild revenue impacted by Colgate non peak.
Let me now move onto cover some other key financial point [laughter].
For the fourth fiscal quarter of 2020.
Operating cash flow for Q4, well on being 254 million.
Strong baseball from slightly net save 22 million for the price corridor.
Capital expenditures for Q4 were on be 16 million a year over year decrease all 79% from RMB. So.
Seventys C 17.
76 million in the same period last year cash.
Capital expenditures accounted for 1.6% of net revenue in Q4, representing a year over year decrease of 420 basis points from 5.8% in the same skewed we'll watch it.
The decrease was mainly actually book to our athletes.
Leasehold improvements and technology investments in prior quarters ended this plane to cash flow control policy during the fiscal two for.
Well Mark group payments from customers that salad, which represents cash collected from in growth students for courses with nice proportionately as the training sessions are delivered was RMB 2.5 billion at the end of fiscal year Twentytwenty represent.
A sequential increase of 7.7% for me and old fiscal Q3, and a year over year increase of 17.1 person for the end of fiscal Q4 last year.
As for August studies slipped 2020, the company had cash and cash equivalents with guests get cash short term investments of RMB 1.8 billion. They.
Based on the latest estimate.
We expect to generate net revenues of RMB 600 to 700 million for the full quota of seats coal 2020 Watt assets September to November Eightth, a traditionally low season for personal lines, it's usually services and leasing volume new customers.
Good assets and the cash sales well typically takes one to two quarters to translate into revenue recognition.
We expect our full year revenue to reach about fiscal 2019 level fiber.
However, this outlook for then once my current view, which is subject to change net.
This concludes our prepared remarks.
I would now turn the call true the operator and open for couldn't today, operator, we are ready to take patches.
Thank you for most of that was Remodels. You also asked a question. Please close for the more.
Well the reversal from <unk>, please for crush storms in true.
For those first question comes from Sean was wrong with Morgan Stanley. Please go ahead.
Hi, and thank you for taking my question I have three questions. The first one being stepped up sales sales and marketing costs in this quarter, a I'm, saying you mentioned that each channel struck teach us checchi match net but can you give us some much details about what the student acquisition cost for each day.
You know net.
For the quarter and Oh, what do you think that that the customer acquisition cost and Walton beach keep them they seem strength.
So just one day he online shop, Okay petition bought impact your assets marketing as well and share.
Second to me so Oh for your online Oh line up.
[noise] shot odd the cheeky margin in this quarter is about 20 share. So wondering why this quarter. Its GP margin. So no and then what should be the normal margin for Oh, My goodness and stuck one each about channel that's why Twentys watch for after me guidance.
Actually you mentioned eight well that's true too fine Nike International, but if we don't catch your average mom shrinking momentum in Q4, it's already high again Q4, Oh for 2000 and 2019, so how long do wind up.
Right and you interest at each line folks and what's your expectation of the revenue contribution from yacht you'd be okay. Thank you very much.
Oh, Thank you, it's some sort of a.
Let me take your question one day at a time. So the first question is regarding the sales and marketing spend.
Spending to pool, let me.
Sorry by explained this is more for the past Q4.
Moments and then I will give you a <unk> outlook for the new kids with Who's on 21.
So for the physical Q for.
We noted the sales and marketing percentage of revenue was 28.7 per cent you feel for versus the 20 ish percent historical level.
That's because strategically we decreased our marketing spending and sales at the two week during the quarter off the center. We opened in late June. So that's the reason why we achieved 45 per cent cash sales growth and close to 80 per cent new students gross.
Quarter over quarter that we extended area. So that's precisely what we tried to do intentionally to build up the new student pool after along a few months or so.
No. There's also a impact by the summer spent spending as we all know is by a lot of industry players.
Players they burned a lot of cash in various channels during the summer so debt equally they spend oh, our cost structure as well.
However.
Starting the new students all year in September that's part of our whole premise strategy. We are we have much more cleared marketing strategy and we had were targeting more premium sector, which will help us precisely ahwoi what's competitions. So we have started.
Oh, well Organised marketing campaign starting in September.
For the new physically if we have a clear slogan and in order to gain customer recognition for bus being that premium there.
We noticed that we explained here as well in the previous earnings call. The.
The percentage for success rates, especially for those of our students it got into the higher top ranked either ice for college has switched historical level. What this a entrance exam seasons that helped us to acquire studios as well.
We also have a much more improved marketing channel strategy.
By targeting a more precisely its customer base in a more focused the channels.
Cash and we were going to promote more local premium suddenly losses and the PR activities took my students.
To summarize going forward, we have a clear Oh, hi, based marketing approach in managing other sales and lots of expenses.
And as you know starting new physical year, Oh product price has increased materially not only for the <unk>, we actually bought but also for the regular product. So that will offset the increased marketing spending and generate as much a reasonable ROI going forward. So I.
Good day for the full fiscal year 2021.
Oh, we're not getting sales margin spending, especially on your revenue will go back closer to the system for level.
That's the first question I think it's no secret second question regarding Oh my.
Well nice growth margin.
You mentioned that it's currently at 20 per cent level, Let me, let me give you a the overall picture for the money specifically comment on Q for only overall picture, we mentioned that well, we're happy reported see growth path for the month for once more on my especially for the probability. So we will we are targeting the same price.
Going forward, while product but.
Have you noticed during Q4, which is for you to.
August the summertime on first on the top line.
We are currently is still at relatively small scale to offset any initial investment and two.
Do you have a reasonable level of.
Gross margin and secondly, during the summertime <unk>. He is people want one small nice still relatively low in order to attract students study all night, that's part of the competitor we strategy as well as we noted during the call. We Nike period, there's lots of summer for.
Notional activities for the all nicely in China.
On the cost structure side, we are still.
Net early stage, where we need to spend.
Interest relatively high proportion.
Build up the one small net doing that true for theory.
But we are very proud and I'm glad that Oh, well net thoughtful and has received a very good customer feedback and other we explained in the earlier presentation, we will continuously improve the functionality of once more like to gain market recognition and customer satisfaction.
So.
Going forward, we do not we do not expect spent more money for the on my platforms. As a result, we think that's the scale, whereas for the increase and the caught maintained at a reasonable level will have a much a reasonable and attractive gross margin going forward I think by the second half.
For 2021, you will see the number would change materially for the commendable.
Thank you for but yes.
Other questions regarding.
The new physical yes, what other 21 guidance why is it better to really.
No we said earlier that we.
We we believe for the new physically our revenue per week, which out both the level of physical used for without the Nike.
Let me give.
To give you some background here on the one hand as you noticed we provided a better we best to other move up recovery for our cash sales team.
Gift items is and that's.
That we are launching all each we are key product, which has been well received by the market. So we're very optimistic about the outlook about top line growth. The next few quarters, but.
But on the other items that we all know the COVID-19 situation in China, especially during this current winter, it's still evolving you had some.
Unpredictable in nature, So we tend to be a little more conservative providing a.
I would think that normalized or aggressive or guidance for the new physical year.
So.
For the more detailed we believe oh up like growth will start lower in the near term and that's why we provided is the current Q1 top line growth is but what I said for rate increases material for the second up the year I think a couple other reasons one is seasonality.
Now do we noticed Q1 is September to November which is it's no snow season for our students to take classes and.
Our debt the meant to book it typically we start up the meat Tony sandwiches in November and you will set a rate during the sentence because on season for March to June then.
And secondly, as we explained earlier there is a gap of one to two quarters between cash out and the revenue recognition. So as you see in the covered and robust sales growth, including a premium product growth that would translate into the revenue recognition later on during the year. In addition, net.
We noticed which we told you earlier debt to.
For teachers size growth of 74% was you know me well continue these through the twin we believe that would translate into robust growth in a few quarters. So net net we are very fortunate for the fiscal year 2021, and we believe well day is a little bit more challenge.
In the near term, but on a full year basis, especially for whats taken up the year, we would have the best growth top line growth as well as margin expansion.
Thank you I can't go to questions.
Thank you, ladies and gentlemen, I was a little margin it's moving to ask your question. Please press Star then one our next question for me comes from fields with Yes. Please go ahead.
[laughter] into free.
I just want to a lot for all the.
Coping items.
Thank you our revenue guidance for the price.
Line 21.
Hey line.
Hi.
Could you just remind debt.
So every day.
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She is full operation.
Ah that's one.
Question.
Automaker.
Hi, sorry line.
Sure I'd say pretty bad debt.
For the one line.
For the <unk>.
I understand it takes time for that.
For two.
True all the way back.
It's not I mean could you just said about the age and mid to longer term outlook and how how.
How old the overall.
Total margin catch up.
Third party price.
For one or whatnot.
Third for the I want to discuss for our longer term.
The G.
He side.
Your side step and a page that best.
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For the I P side, almost all of my 23, or so so could you just elaborate a little bit items, it's five or the highest peak volume.
Good day.
Other than.
Uh huh.
Got you.
Thank you.
All right. Thank you Phoenix, that's a little bit back on all day. The only question I think I get most of the questions.
So just for the big questions.
First one your question regarding the guidance for Q1 debt.
Provided which was 600 and 700 million RMB.
So your question is regarding why is.
It is lower than you would think right.
Ah, Yes, why why it's declining go out here.
Yeah. So yeah. That's that's it. Thank you so as you know the true one it's a it's a because it not only you can look at all financial it seems like a few years, it's always been that Oh revenue will have much a local level you'd be more going from Q4 to Q1 two pool.
He is a peak season have you seen the summer. So have you witnessed from many of our industry players they are ready for them.
Revenue on at pretty high level during the summer, but Q1, it one day and use them to Mr. Starting in September but before any major exotic in which is the person with the new Attorney example, which is November so during this period, it's more a low low season for us. So that's why you'd be look.
Historically, the revenue levels will drop by about 40% to 50%.
For for this particular fiscal year 2021 for one for this particular range of 600 to 700 million RMB guidance. That's because the short term, we think there's still a short term impact near term impact, but well be 19 as you know our Beijing operation when we started in September.
For the older MACI, our number one of our top 10 cities still being closed today.
So and as you know the for the younger children.
Space the steel impacts for a net.
Then also concern for parents to send the kids to our learning centers for those weighted and stuff like that we'll still have some per loan impact for the Colgate.
So.
With that I think 600 to 700 million.
Represents 57 noble of revenue for for US and then as you probably noticed a recent robust cash sales growth, especially the robots to sell alcohol group, although he or she product as I mentioned the other question that.
What take time pick up order a true to translate into revenue to which we believe we will be true Q2 and Q3.
So with that three reasons that's been for you why we provide such a range of 600 to somebody Ltd.
Guidance for Q1.
Your second question I thinks we guarding the <unk>, we are keep covance unique long ex.
As we laid out on page 15 book that helped us like.
This is a result of that much more comprehensive financial analysis, we did when we designed these products. So we took a quite a for a couple of months is without see you all in the rest of the team exploring the option to it but we but we didn't we fixed the price at 1.8 times.
But as you know in the previous year, we priced at 1.4 times, but at least as strong demand, we see and also the monkey study and poverty parents feedback. We believe 1.8 times is a good price for price range to justify a much improved product so.
At the same time as he noted would price we increased our teachers profile.
By operating more salary and hourly rates for the teachers for better teachers. So the teacher costs decreased by 1.5 times. So as a result teacher cost will drop from a regular product 30% to 22%.
And the rest will increase as you know we will open more flagship stores in an open more Oh, VIP Nerney special rooms, a larger rooms for students so rental cost as a percentage of revenue increased 5% to 11% for the product. So net net our gross margin will have a three percentage point increase.
And operating margin you will have a nine percentage point increase.
That's because we'll see much some more operating leverage we're coming out of this this higher price but relative.
Relative to a lower number for students operations. So we're safe long huh.
Acquisition cost for each of these students as well as let's say more on the GE and they cost us to run this product.
Your I think your third question is regarding the.
The growth driver for picture will provided on page seven which we showed a clear.
Free EPS growth drivers for once more we have to keep business I mean, your comment that builds up really positive and optimistic projection, we up but to be honest with you. We have we think that this is very reasonable projection to support our growth strategy, we laid out earlier, Oh, let's see on Tim Steve, but it wasn't too.
To be more specific there will be true fundamental driver for us going forward. One is product innovation. So we showed you already see elite VIP, how he looked like the features so we're confident that we're going to generate.
About 20% cash sales from this product within this year.
Within three years, we believe this part it would take.
Up to 60% for about total so we I P cells. This is based on a comprehensive market starting with debt and lot of interviews, we've done with our parent so they're confident throughout organization not only to help management, but also how school level management. They are very optimistic that would they can achieve.
EBIT, 60% within three years as I mentioned within first give would look at 20%. So six instant book very reasonable then fluctuates centers will open up to 150 to 200, it fluctuates centers for the first year with an open 27.
It fluctuates centers, but.
2200, plus the center is only about.
40% well for recurrent center base of 480. So that's that's literally within the next three years, that's a reasonable growth rates. We are then.
Then interest S.P. incremental book to two times by three years, that's a combination of two factors one there's a higher percentage of the need for broad product, which I mentioned it will be 60% by year three as you know, which 1.8 on higher price and we believe the price will further go up.
The next day, we it would be for the football product. That's also the other factor is the ASP increased by regular VIP product, which we already increased its about 20%. This year. So far we believe as we reported in Huntsville product and the teachers and money spent experience.
I won't be able to increase obviously, if the record products as well. So other combined combination basis. We believe HCV was two times by year three.
And the second point of the driver is did you scale up as we mentioned above mentioned earlier that we will focus on the key cities to Maximise the shares.
For those cities, and then which say quarterly growth in probability that what that we think will be attractive as a result, we layout operating margin here. This margin as you know is supported by the existing centers performance. We provided in the financial sector. It is quite quite quite in line with our current book.
Woman's, but again will further improve as we promote more premium product as well as focus more on debt at.
That's a tough cities to maximize scale.
So we believe in summary. These are this is this drivers economics, a much a reasonable.
Much. It's a result of our focused strategy. So we're very optimistic.
For the newest relative to go permits for two we up it's a clearly the rights relative for us missed the customers' needs and differentiate us from the rest of the market. So they are very very very confident that this strategy will help us for which the scale mentioned area and also the Columbia.
Sales here.
Okay, Yeah. Thank you very much.
Thanks <unk>.
Ladies and gentlemen. This concludes the question answer session, probably turn the conference back over to the management team for any final remarks.
Well, thank you operator, and quoting on behalf of the entire management team, we'd like to thank you again for your participation in todays for if you have any for the inquiries in the future. Please feel free to contact that knowledge that day to disconnect. Thank you bye-bye.
Thank you. This concludes today's conference call you may now disconnect your wrong and nobody wonderful day.